Rifle sales tax hike approved to ease water rate increases

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By an overwhelming margin, Rifle voters said they wanted to share the cost of a new water treatment plant with shoppers and approved a 3/4 of a cent sales and use tax rate hike in Tuesday's general election.

Question 2A asked voters to approve the increase in exchange for lower future water rate hikes needed to build and operate a new $25 million water treatment plant.

It was given the go-ahead by a 1,735 to 1,192 count (60 percent to 40 percent) in unofficial final results.

Initial results showed the measure with a nearly 500-vote lead in early and mail-in ballots turned in before Tuesday. Votes cast at the single precinct in Rifle on Election Day were much closer, showing only a 291-271 margin in favor of the question.

The tax hike will take effect in January, raise an estimated $1.65 million a year, and increase the city's sales and use tax rate from 3.5 cents to 4.25 cents.

The issue did not lead to any organized opposition.

Mayor Jay Miller said he wasn't surprised the measure was approved.

"For those who understood the measure, it was kind of a no-brainer," he said. "I know there are those who might have preferred to see a sales tax go toward a recreation center or the [New Ute Events Center]."

But Miller said the likely main reason the measure passed is that voters saw how it would affect them personally.

"I've always felt that if you see what you get for a tax hike, you're more likely to agree," Miller added. "I know there are those who are just opposed to any sales tax because they think it will never end. That's not the case with this one. It will go away in 20 years or sooner" if the city's debt service is paid off earlier.

City officials have said the more than 30-year-old Graham Mesa water plant is aging, undersized to serve projected population growth and unable to meet possible tougher federal water quality standards in the future.

The city borrowed $25.5 million from the Colorado Water and Power Development Authority to build the new plant. The loan comes from a special fund dedicated to water projects. The effective interest rate will be 1.86 percent, with $2 million loaned interest-free, resulting in what city officials called "an overall historic low loan rate."

Repayment requirements of the loan led to sharply higher water rates in September, and more than doubled some customers' water bills, payable in October. Money from the higher water rates will help pay for operations and associated costs of the new plant.

Miller said a few months into the new year, the city will look at how revenues are coming in from the tax hike, then very likely sharply reduce the September rate hikes, both base and tiered rates.

"And the second phase rate hike in April will not occur," Miller added.

City Manager John Hier had recommended the city take two steps if the tax hike was approved: Eliminate the second water rate increase planned for April 2013, and lower the recent increase, "so the combined revenue from the sales tax and new rates will generate only that revenue needed to pay the debt service and increased operation and maintenance cost on the new plant," he wrote in a memo to the City Council earlier this year.

Due to the "excellent" loan rate received from the Colorado Water and Power Authority, Hier continued, "it may be possible to lower ... monthly base rates to $23 per month and significantly reduce the ... tier rates."

Bids for the new plant are scheduled to be sought in January, with construction lasting two years.

The final cost of the new plant may change, depending upon the final design and number of bids received. Nine contractors have been prequalified to bid on the project.